Is It Time to Buy the Dip on Birkenstock?

Birkenstock Holding, one of the significant IPOs of 2023, recently unveiled its solid fiscal first-quarter results following its debut as a public Company. Surprisingly, despite the positive earnings report, the Company’s share price took a hit, prompting investors to wonder if this presents a buying opportunity.

The renowned sandal maker, with its rich history dating back to 1774 and now headquartered in London, experienced a significant drop in its stock price, plummeting by as much as 11% in pre-market trading on Thursday to approximately $45 per share. Despite a partial recovery, the share price dropped by about 8% to $47 per share by mid-afternoon Eastern time.

In its fiscal Q1, ending on Dec. 31, Birkenstock achieved record revenue of €303 million, marking a 26% year-over-year increase and surpassing analysts’ expectations. Revenue growth was notable across all regions, with sales surging by 19% in the Americas, 33% in Europe, and 51% in the APMA region (Asia Pacific, Middle East, and Africa).

The boost in revenue was attributed to increased capacity, heightened demand, and sales at higher prices due to inflation. The continued growth of Birkenstock’s direct-to-consumer (DTC) sales, which saw a 30% increase in the quarter, was particularly promising. Additionally, business-to-business (B2B) sales rose by 22%.

However, despite meeting expectations, Birkenstock reported a net loss of $7.1 million for the quarter. Adjusted net income stood at $16.7 million, in line with analysts’ forecasts. The Company’s stock price decline may have been influenced by concerns over higher expenses and decreased EBITDA margin.

CEO Oliver Reichert reassured investors that the expense increase was part of the Company’s strategic investments to support future growth. He reiterated Birkenstock’s outlook for fiscal 2024, aiming for a gross profit margin of over 60% and an adjusted EBITDA margin in the low 30% range.

While Thursday’s sharp decline in Birkenstock’s stock price may present an attractive entry point for investors, monitoring the Company’s progress and financial results may provide better visibility into its prospects. Investors should pay close attention to expenses, capacity expansion, and earnings updates to make informed decisions.

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